argued submitted pasadena california: March 1, 1993.
Appeal from the United States District Court for the Central District of California. D.C. No. CV-90-3971-ER. Edward Rafeedie, District Judge, Presiding.
Before: Dorothy W. Nelson, Charles Wiggins, and Edward Leavy, Circuit Judges. Opinion by Judge Wiggins.
On July 26, 1990, the United States brought suit to reduce to judgment unpaid federal tax assessments made against Orville Wayne McGee that totalled $92,957.28, plus interest. McGee moved to dismiss the suit for failure to state a claim on the ground that it was not brought within the six-year limitations period of 26 U.S.C. § 6502(a)(1988). McGee asserted that the complaint failed to allege that he had waived the limitations period. The district court granted the United States leave to amend the complaint. Both parties then moved for summary judgment on the statute of limitations issue, and the district court granted the government's motion for summary judgment. McGee appeals. We have jurisdiction pursuant to 28 U.S.C. § 1291. We affirm.
McGee and his former wife operated a mobile home sales business during 1980 and 1981. During this time, some of the taxes that were withheld from their employees' wages were not paid to the government. In June of 1982, the Internal Revenue Service ("IRS") made several assessments against the McGees. As of July 26, 1990, McGee owed the government $92,957.68, plus interest.*fn1 McGee does not dispute the merits of the assessments. He merely contends that the government was time barred from reducing the assessments to a judgment.
On September 27, 1983, McGee submitted an offer in compromise to the IRS regarding the assessments on IRS Form 656. This offer included the following waiver:
6. The taxpayer-proponents waive the benefit of any statute of limitations applicable to the assessment and collection of the liability sought to be compromised, and agree to the suspension of the running of the statutory period of limitations on assessment and collection for the period during which this offer is pending, . . . and for 1 year thereafter.
The IRS signed the Form 656 and accepted this waiver the same day. The offer in compromise was then assigned to IRS Revenue Officer Hall for investigation. On April 17, 1984, Hall advised McGee that the offer would not be accepted as submitted but might be accepted if modified. Negotiations continued between Hall and McGee. On September 25, 1984, McGee advised Hall that he wanted Hall's proposed offer. On October 1, 1984, Hall sent an amended offer to McGee for his signature. McGee did not return the amended offer. On October 19, 1984, the IRS sent McGee a letter with an attached recommendation report that was drafted by Hall. The letter indicated that McGee's offer in compromise was not acceptable and that he had 15 days to appeal the ruling. McGee did not appeal. On November 14, 1984, the IRS sent him a letter formally rejecting his offer.
I. Statute of Limitations
We review de novo the district court's grant of summary judgment. See FDIC v. O'Melveny & Meyers, 969 F.2d 744, 747 (9th Cir. 1992). We view evidence in the light most favorable to the non-moving party to determine whether there are any genuine issues of material fact for trial. See id. The government has the burden of proving the existence and validity of a waiver of the statute of limitations. See United States v. McGaughey, 977 F.2d 1067, 1071 (7th Cir. 1992), cert. denied, 123 L. Ed. 2d 467, 113 S. Ct. 1817, 1993 WL 58773 (Apr. 5, 1993); Estate of Dillingham v. Commissioner, 903 F.2d 760, 762 (10th Cir. 1990).
The issue in this case is when the effect of McGee's waiver of the statute of limitations terminated. The waiver suspended the running of the statute of limitations for the period during which the offer in compromise was "pending" and for one year thereafter. If the government's October 19, 1984, letter to McGee or any prior act by the government caused the offer in compromise to be no longer "pending," then the government's July 26, 1990, filing of suit against McGee was barred by the statute of limitations. However, if the offer in compromise was still "pending" when the government rejected it in its November 14, 1984, letter to McGee, then the government's suit was timely.
McGee makes two arguments to support his position that the statute of limitations ran before the government filed suit. First, he asserts that prior to October 19, 1984, the IRS had abandoned its consideration of his offer in compromise, thereby impliedly rejecting the offer. Next, he contends that even if negotiations continued into October ...